Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Rates: Fed funds held at 4.25-4.50%, bank reserves rate at 4.40%, discount rate at 4.50%. Treasury QT slowed to -$5 billion/mo (from -$25 billion/mo), MBS QT continued at -$35 billion/mo, probably until the MBS holdings are all gone. Flows in Treasury General Account (TGA) were a consideration in the QT reduction.
Inflation is elevated, but declining. Tariffs are contributing some to inflation, more for goods inflation. They are also affecting the short-term inflation-expectations & that may be transitory. Retaliatory tariffs are hard to predict, but the Fed assumes the worst case.
Economy is strong. Recession probabilities remain low.
Labor market is solid. Wage increases aren't inflationary. Both hiring & layoff levels are low.
The effects of new government policies for trade, fiscal policy, immigration & deregulation aren't in the data yet. The uncertainties are high. Confidence & sentiments are low, but the data look OK for now. Consumer unhappiness is from high price levels for groceries & services, but those are backward-looking (low inflation doesn't mean low prices). The Fed can wait & watch.
New SEPs were released & discussed.
Fed's 5-year review is continuing with focus on labor & jobs now.
Powell dodged questions about the firing of 2 FTC commissioners & the impact of DOGE checks (=< $5,000).
(The quote from Powell is from the press conference following statement release and sounds a bit more concerning / critical of the tariffs (“an exogenous source”) than what’s reflected in the official FOMC statement.)
“The Federal Reserve's first set of projections since Donald Trump's inauguration underscored -in the central bank's understated and technocratic fashion-just how much the president's plans to press ahead with widespread tariffs have turned the economic outlook on its head. Months ago, policymakers presumed they would spend 2025 gradually cutting rates to keep inflation heading down without a big rise in joblessness to achieve the so-called soft landing. The latest projections point to the prospect that tariffs covering a swath of goods and materials will send up prices while sapping investment, sentiment and growth, at least in the short run. ‘We now have inflation coming in from an exogenous source, but the underlying inflationary picture before that was basically 2/% inflation, 2% growth and 4% unemployment’, said Fed Chair Jerome Powell on Wednesday.”
Excerpted from The Wall Street Journal - Reported By Nick Timiraos (10:40 PM 3/19)
Per @hank's post, that's probably why FOTUS is practically begging the Fed to lower interest rates in the hopes that would 'offset' any increased costs incurred by his tariff follies.
From The Barron's Daily : The Fed’s Outlook Should Have Spooked Markets. Why It Did the Opposite and 5 Other Things to Know Today.
Federal Reserve Chair Jerome Powell showed his strength as a market whisperer on Wednesday. Even though interest rates stayed the same, stocks rose by the most on a Fed decision day since last July.
Most important, perhaps, was that Powell managed to avoid the ire of President Donald Trump. Sure, Trump posted that the Fed should be cutting after the decision. But it was a relatively mild rebuke that doesn’t suggest the central bank and the administration are on a collision course.
The market’s embrace of Powell’s message is a bit of a puzzle. The projections still show just two quarter-point rate cuts this year, the same as in December. In fact, a closer examination shows the bias among rate setters has shifted toward fewer cuts—even though the median outlook is the same, fewer people see more than two cuts. What’s more, Powell was particularly eager to emphasize the uncertainty in the outlook.
It gets worse. The Fed also raised its inflation forecasts and lowered projections for growth. That’s starting to sound a bit like stagflation, or inflation without economic growth, which isn’t good for stocks.
But the market seemed to take this in its stride because Powell instilled confidence in other ways. First, the Fed eased plans to sell bonds back into the market, which is a subtle form of lowering borrowing costs. He also said that if tariffs were to cause an uptick in inflation, the Fed would be able to look through it as long as it’s “transitory.”
That might be an unfortunate word choice. It was used to describe what was happening after the Covid-19 pandemic, which of course didn’t seem like short-lived inflation at all. But it’s true that the Fed could actually make things worse if it responds to temporary price gains that will blow over by themselves.
Investors are right to be encouraged by Powell’s words. There is a lot to worry about these days—tariffs, wars, and rapid changes to government policies. At least Powell brings calm and flexibility in times of heightened market pain.
. . . FOTUS is practically begging the Fed to lower interest rates in the hopes that would 'offset' any increased costs incurred by his tariff follies.
Hi Rick,
Begging was / is conveyed through Scott Bessent during Powell's weekly meetings and through other back channels. That Trump post was made as a threat / strong arm / bully (pick your choice word).
People who are impulsively (but not deliberately) disruptive also disrupt themselves. They can not even see when others are trying to be helpful to them.
Comments
Rates: Fed funds held at 4.25-4.50%, bank reserves rate at 4.40%, discount rate at 4.50%. Treasury QT slowed to -$5 billion/mo (from -$25 billion/mo), MBS QT continued at -$35 billion/mo, probably until the MBS holdings are all gone. Flows in Treasury General Account (TGA) were a consideration in the QT reduction.
Inflation is elevated, but declining. Tariffs are contributing some to inflation, more for goods inflation. They are also affecting the short-term inflation-expectations & that may be transitory. Retaliatory tariffs are hard to predict, but the Fed assumes the worst case.
Economy is strong. Recession probabilities remain low.
Labor market is solid. Wage increases aren't inflationary. Both hiring & layoff levels are low.
The effects of new government policies for trade, fiscal policy, immigration & deregulation aren't in the data yet. The uncertainties are high. Confidence & sentiments are low, but the data look OK for now. Consumer unhappiness is from high price levels for groceries & services, but those are backward-looking (low inflation doesn't mean low prices). The Fed can wait & watch.
New SEPs were released & discussed.
Fed's 5-year review is continuing with focus on labor & jobs now.
Powell dodged questions about the firing of 2 FTC commissioners & the impact of DOGE checks (=< $5,000).
https://ybbpersonalfinance.proboards.com/post/1913/thread
https://www.schwab.com/learn/story/fomc-meeting
(The quote from Powell is from the press conference following statement release and sounds a bit more concerning / critical of the tariffs (“an exogenous source”) than what’s reflected in the official FOMC statement.)
“The Federal Reserve's first set of projections since Donald Trump's inauguration underscored -in the central bank's understated and technocratic fashion-just how much the president's plans to press ahead with widespread tariffs have turned the economic outlook on its head. Months ago, policymakers presumed they would spend 2025 gradually cutting rates to keep inflation heading down without a big rise in joblessness to achieve the so-called soft landing. The latest projections point to the prospect that tariffs covering a swath of goods and materials will send up prices while sapping investment, sentiment and growth, at least in the short run. ‘We now have inflation coming in from an exogenous source, but the underlying inflationary picture before that was basically 2/% inflation, 2% growth and 4% unemployment’, said Fed Chair Jerome Powell on Wednesday.”
Excerpted from The Wall Street Journal - Reported By Nick Timiraos (10:40 PM 3/19)
Per @hank's post, that's probably why FOTUS is practically begging the Fed to lower interest rates in the hopes that would 'offset' any increased costs incurred by his tariff follies.
:
The Fed’s Outlook Should Have Spooked Markets. Why It Did the Opposite and 5 Other Things to Know Today.
Federal Reserve Chair Jerome Powell showed his strength as a market whisperer on Wednesday. Even though interest rates stayed the same, stocks rose by the most on a Fed decision day since last July.
Most important, perhaps, was that Powell managed to avoid the ire of President Donald Trump. Sure, Trump posted that the Fed should be cutting after the decision. But it was a relatively mild rebuke that doesn’t suggest the central bank and the administration are on a collision course.
The market’s embrace of Powell’s message is a bit of a puzzle. The projections still show just two quarter-point rate cuts this year, the same as in December. In fact, a closer examination shows the bias among rate setters has shifted toward fewer cuts—even though the median outlook is the same, fewer people see more than two cuts. What’s more, Powell was particularly eager to emphasize the uncertainty in the outlook.
It gets worse. The Fed also raised its inflation forecasts and lowered projections for growth. That’s starting to sound a bit like stagflation, or inflation without economic growth, which isn’t good for stocks.
But the market seemed to take this in its stride because Powell instilled confidence in other ways. First, the Fed eased plans to sell bonds back into the market, which is a subtle form of lowering borrowing costs. He also said that if tariffs were to cause an uptick in inflation, the Fed would be able to look through it as long as it’s “transitory.”
That might be an unfortunate word choice. It was used to describe what was happening after the Covid-19 pandemic, which of course didn’t seem like short-lived inflation at all. But it’s true that the Fed could actually make things worse if it responds to temporary price gains that will blow over by themselves.
Investors are right to be encouraged by Powell’s words. There is a lot to worry about these days—tariffs, wars, and rapid changes to government policies. At least Powell brings calm and flexibility in times of heightened market pain.
Begging was / is conveyed through Scott Bessent during Powell's weekly meetings and through other back channels. That Trump post was made as a threat / strong arm / bully (pick your choice word).
People who are impulsively (but not deliberately) disruptive also disrupt themselves. They can not even see when others are trying to be helpful to them.